06 August 2026 Daily Current Affairs

LAF vs SDF vs MSF in Monetary Policy 

LAF (Liquidity Adjustment Facility)

The umbrella facility RBI uses to inject or absorb liquidity daily. It has two parts:

• Repo rate: rate at which RBI lends money to banks (against government securities as collateral)

• Reverse repo rate: rate at which RBI borrows money from banks

SDF (Standing Deposit Facility)

Where banks park surplus cash with RBI without giving any collateral. It replaced the reverse repo as the floor of the corridor in 2022. Because it needs no collateral, RBI can absorb unlimited liquidity through it — that’s the main upgrade over reverse repo.

The SDF was introduced when there was a liquidity surplus in the market, meaning there was more money in the banking system than needed.

MSF (Marginal Standing Facility)

An emergency window where banks borrow from RBI when they’re short on cash, even beyond their normal limits — but at a higher rate. It’s the ceiling of the corridor.

Quick way to remember the corridor:

• SDF (floor, no collateral, banks deposit) → lowest rate

• Repo rate (repo rate, the policy rate)

• MSF (ceiling, emergency borrowing) → highest rate

House Committee :-

Why in News – Has not been constituted in Lok Sabha after 1 month of last committee’s tenure has already completed.

About :- House Committee is both present in LS and RS. 

Here we will talk about House committee of Lok Sabha:- 

• Consists of not more than 12 members, appointed by the Speaker.

• Term: not exceeding one year.

• A member can be re-nominated by the Speaker to the new House Committee.

Nature & Functions (advisory in nature)

• Deals with all questions relating to residential accommodation for Lok Sabha members.

• Exercises supervision over facilities — accommodation, food, medical aid, and other amenities — in members’ residences and hostels in Delhi.

Coordination with Rajya Sabha

• Matters of common interest to both Houses are considered and decided jointly by the Chairmen of both House Committees (LS + RS) at joint sittings — but only if so authorised by their respective committees.

• Secretariat assistance for such joint sittings is provided by the Lok Sabha Secretariat.

• Minutes require approval by both Chairmen.

Various Committees of Parliament:

India’s Parliament has multiple types of committees. They can be differentiated on the basis of their work, their membership and the length of their tenure.

However, broadly there are two types of Parliamentary Committees– Standing Committees and Ad Hoc Committees.

The Standing Committees are permanent (constituted every year or periodically) and work on a continuous basis.

While the Ad Hoc Committees are temporary and cease to exist on completion of the task assigned to them.

They are further subdivided into Inquiry Committees and Advisory Committees.

The principal Ad hoc Committees are the Select and Joint Committees on Bills.

Clouded Leopard

News:- Meghalaya launches mission to protect clouded leopards. 

The clouded leopard (Neofelis nebulosa) is a medium-sized wild cat native to the Himalayan foothills and Northeast India. 

It is currently listed as ‘Vulnerable‘ on the IUCN Red List and is the state animal of Meghalaya.

The Ministry of Environment, Forest and Climate Change has reaffirmed its commitment to conserving one of Asia’s most elusive wild cats through the launch of the Clouded Leopard Conservation Action Plan (CAP).

International Clouded Leopard Day, observed on 4 August 2026. 

The CAP was prepared under the Government of India–Global Environment Facility (GEF)–UNDP initiative.

Fiscal federalism, efficiency versus equity concerns

16th Finance Commission (FC-16): Equity vs Efficiency Debate

Context: FC-16, chaired by Arvind Panagariya, submitted its report covering 2026-31. It retains vertical tax devolution at 41% but fundamentally restructures grants-in-aid — reigniting the equity vs efficiency debate in fiscal federalism.

Concept Box: Finance Commission

• Constitutional body under Article 280, appointed every 5 years by the President.
• Mandate: recommend distribution of net tax proceeds between Centre-States (vertical) and among States (horizontal), and principles governing grants-in-aid under Article 275.
• Historically functions as a corrective/equalising institution — mediating asymmetry between a fiscally dominant Union and constrained States.

Key Numbers — FC-15 vs FC-16

Parameter FC-15 FC-16 Tax devolution share 41% 41% (retained) Grants-in-aid ₹10.1 lakh crore ₹9.47 lakh crore Grants as % of total transfers 19.4% 8.3% Income distance weight 45% 42.5% GDP contribution weight Not present 10% (new) Local body allocation — ₹7.2 lakh crore

What FC-16 Changed

• Eliminated: Revenue Deficit Grants (RDGs), sector-specific grants, State-specific grants.
• Restricted grants-in-aid to only local bodies and disaster management.
• Reduced income-distance weight (equity criterion) while introducingGDP-contribution weight (efficiency criterion).
• Proposed a “grand bargain”: gradual merger of cesses and surcharges into the divisible pool, in exchange for States accepting a lower devolution share (no binding rollback of cesses recommended despite State demands).
• Introduced tied, performance-based grants for local governments — linked to water/sanitation targets, revenue mobilisation, audited accounts.

Core Critique (Author’s Argument)

• Asymmetric treatment: RDGs (State support) scrapped for “fiscal discipline,” but cesses (Union’s non-shareable revenue) untouched — protects Union fiscal space while burdening States.
• Aggregation fallacy: Commission cites aggregate State finances as healthy, masking deep inter-State disparities (a surplus state can’t offset a deficit state).
• 8 States (mostly NE states + West Bengal) face reduced share in both tax devolution and grants-in-aid; 6 moreStates see declining grant shares.
• Double burden: lower tax devolution + no RDGs (which were ~20% of FC grants in 2024-25).
• Shift from need-based equalisation → compliance-based incentivisation, reducing State fiscal autonomy.
• 18 States demanded devolution share be raised to 50% — not accepted.

Illustrative State Examples (article-cited)

• Kerala: human capital/remittance-export model → ~23% of India’s total remittances, but strains State finances via education borrowing.
• Punjab: ensures national food security via wheat/rice (non-taxable crops) + bears border-state costs, yet erodes its own revenue base.

One-liners

• Article 275 → grants-in-aid; Article 280 → Finance Commission.
• FC-16 chair: Arvind Panagariya; period: 2026-31.
• Devolution unchanged at 41%; grants-in-aid share nearly halved.
• RDGs abolished; cesses/surcharges left largely untouched.

Practice MCQ

Q. With reference to the Finance Commission, consider:

1. Grants-in-aid to States are provided under Article 280.
2. The FC-16 retained the States’ share in the divisible pool at 41%.
3. FC-16 recommended eliminating Revenue Deficit Grants.

Which are correct? (a) 1 and 2 (b) 2 and 3 (c) 1 and 3 (d) All three

Answer: (b) — grants-in-aid fall under Article 275, not 280.

Mains Practice Question (GS-2/GS-3, 250 words)

“The 16th Finance Commission’s restructuring of grants-in-aid reflects a shift from equity-based fiscal federalism to efficiency-based fiscal federalism.” Critically examine this statement with reference to India’s constitutional design for Centre-State fiscal relations.

Supreme Court’s Wetland Mining Safeguard Extended Nationwide

Context: SC clarified that its Feb 2024 Asan Wetland order — requiring prior approval before mining within 10-km radius of a wetland conservation reserve — applies not just to Asan (Uttarakhand)but to all notified wetland conservation reserves across India, for parity.

What triggered the clarification?

• Himachal Pradesh government sought exemption, arguing:
  • Asan reserve lies outside HP.
  • Unlike national parks/wildlife sanctuaries, wetland conservation reserves have no statutory buffer zone.
• Bench (CJI Surya Kant, Justice Joymalya Bagchi): principle applies wherever a community reserve or wetland conservation reserve exists.
• Directed NBWL Standing Committee/MoEFCC to first determine if the Asan wetland extends into HP — if yes, 2024 directions apply there too; if no, normal statutory framework governs.

Background: Asan Wetland Case

• Located at confluence of Asan and Yamuna rivers, Uttarakhand.
• Designated a Ramsar site in 2020; key habitat for migratory waterbirds.
• Feb 14, 2024 interim order: no mining within 10 km without clearance from NBWL Standing Committee/MoEFCC.

Concept Box: Ramsar Sites

• Wetlands designated under the Ramsar Convention on Wetlands (1971), signed at Ramsar, Iran.
• India joined as Contracting Party in 1982.
• India has 101 Ramsar sites — highest in Asia.
• 101st site: Glaw Lake, Arunachal Pradesh (notified Aug 3, 2026) — state’s first Ramsar site; tally rose from 98 to 101 in 2026.
• Important: Ramsar tag ≠ automatic statutory protection under Indian law; it only commits India to maintaining ecological character via domestic laws.

Legal Framework — Mining Near Wetlands

• Neither the Ramsar Convention nor Wetlands (Conservation and Management) Rules, 2017 prescribe a statutory buffer or mining ban near Ramsar sites.
• Wetlands Rules, 2010 (repealed): had explicit prohibited-activities list (reclamation, new industries, waste dumping) + mandated EIA + zone-of-influence clearances.
• Wetlands Rules, 2017: decentralised regime — shifted regulation to State Wetland Authorities; dropped the prohibited-activities list.
• 2017 Rules’ validity under challenge in SC — petitioners argue it excludes many artificial Ramsar wetlands and dilutes 2010-level protections.
• SC’s Asan directions thus act as a judicially created safeguard filling this regulatory gap.

Comparison: Mining Norms Near Protected Areas

Area type Legal basis Buffer/Restriction National Parks/Wildlife Sanctuaries Wildlife (Protection) Act, 1972 + SC order Mining banned within 1 km (or larger declared ESZ) Forest land Van (Sanrakshan Evam Samvardhan) Adhiniyam, 1980 Central govt approval needed for diversion Wetland Conservation Reserves Judicial order (Asan case) 10 km — clearance from NBWL/MoEFCC needed Any large project EIA Notification, 2006 Environmental clearance generally required

One-liners

• Asan Wetland → Ramsar site (2020), Uttarakhand, Asan-Yamuna confluence.
• SC’s 10-km mining safeguard now applies to all wetland conservation reserves (parity principle).
• 101 Ramsar sites in India; latest = Glaw Lake, Arunachal Pradesh (Aug 2026).
• Wetlands Rules 2017 replaced 2010 Rules; decentralised to States; validity under SC challenge.
• 1-km mining ban near NPs/WLS is statutory + judicial; 10-km wetland safeguard is purely judicial (gap-filling).

Practice MCQ

Q. Consider the following statements regarding Ramsar sites in India:

1. A Ramsar designation automatically creates a statutory mining-free buffer zone under Indian law.
2. India has the highest number of Ramsar sites among Asian countries.
3. The Wetlands (Conservation and Management) Rules, 2017 retained the explicit list of prohibited activities from the 2010 Rules.

Which is/are correct? (a) 2 only (b) 1 and 2 (c) 2 and 3 (d) All three

Answer: (a)

Mains Practice Question (GS-3, 150 words)

Examine the adequacy of India’s legal framework for wetland conservation in light of the Supreme Court’s directions on mining near wetland conservation reserves. How does it compare with the protection regime for national parks and wildlife sanctuaries?